UK: Policy Exchange proposals for bank directors' pay

Policy Exchange - an independent, non-partisan education charity with particular interests in free market solutions to public policy questions - has published recommendations for reforming bank executives' remuneration. In a document titled "The Balanced Incentive Scheme - Changing the Bonus Culture for Senior Banking Executives", two changes are advocated:

• Introducing redeemable convertible preference shares to bonus packages, rather than relying on common equity. PE states that these provide a balanced incentive: they pay a fixed annual dividend, and are not as volatile as the underlying equity.
• Shareholders must approve the appointment of the remuneration advisers, and their fees, at the annual general meeting, by amendment to the Combined Code. PE states that this would balance any conflict of interest between the executive directors, non-executive directors, and shareholders.